Real estate developer Kaisa misses payment as China default contagion continues

In another testimony that China’s real estate industry is crippled by a severe debt crisis, the contagion claimed another victim, this time real estate developer Kaisa Group Holdings, who missed a large payment on Thursday.

Shares in Hong Kong-listed Kaisa were suspended on Friday after the property developer – which is the 25th largest in China – failed to pay interest on a wealth management product (WMP). According to an exchange document, the Shenzhen-based developer is facing external liquidity issues, causing its shares to fall nearly 15% for the week and 70% since the start of the year.

According to Reuters who cited people familiar with the matter, senior Kaisa executives spoke to WMP investors on Thursday to review potential payment plans, as the developer faces around $ 2 billion in principal and cash. unpaid interest. So far, investors have opposed such options, and regulators in Shenzhen are now due to meet on Friday to discuss the company’s liquidity issues in more depth.

Much like Evergrande, who is plagued by a mountain of over $ 300 billion in debt (which no one seems to care about anymore), Kaisa has a market value of around $ 1 billion and is also one of the most large borrowers of international funds. The company has more than $ 59 million in coupon payments due November 11 and 12, as well as $ 400 million in offshore senior notes due December 7.

Also similar to Evergrande, Kaisa has revealed he’s trying to speed up a number of asset sales in a bid to consolidate more cash. However, that didn’t stop the credit bureaus from slashing the developer’s rating. Just last week, Fitch Ratings and S&P Global downgraded Kaisa’s rating, citing a significant drop in cash flow.

With another developer now facing an unprecedented liquidity crunch, China’s real estate house of cards continues to draw nearer its demise. Highlighting this point, Chinese junk bond yields hit a new high on Thursday and currently sit above 21% …

Information for this briefing was found via Kaisa and Reuters. The author has no title or affiliation related to this organization. Not a buy or sell recommendation. Always do additional research and consult a professional before purchasing a title. The author does not hold any license.

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Elaine R. Knight

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